Okay, so the topic is not as Shakespearean as the title would suggest. Sun Tzu may ask if this is a winning strategy or a political tactic. Most would agree that long-term planning pays dividends if you asked them to consciously and rationally choose an approach. So, why do we hear so much about the entrepreneurial approach? Why do so many leaders dive right in, keen to see the fruits of their labour take shape? How come so many businesses launch products with a high chance of failure? Read on as we ask, long-term planning or short-term action, that is the question.
Long-term planning as old as strategic planning
The long-term plan, or LTP, is as old as strategic planning itself. Since the concept originated in management thinking back in the mid-1960s, leaders have tried to put structure to strategy. Long-term planning enables the top businesses to set a lasting vision, long-term goals and a path to organisational growth. Looking 5-10 years ahead gives boards, investors and other stakeholders a guide to future decision-making. It also demonstrates competence, credibility and requires confidence to execute against the plan.
All long-term plans are a formal strategic process. Boards that embark upon LTP derive from it personal learning, new strategic goals and organisational stability. In general, such businesses who successfully, robustly and routinely engage in long-term planning deliver long-term success. This equates to growth in profitability, brand equity, market share, effectiveness and satisfaction. So, why doesn’t every business go through this process?
Short-term action seen as beneficial?
The Cambridge Dictionary online defines an entrepreneur as, “someone who starts their own business, especially when this involves seeing a new opportunity.”[i] Additionally, Dictionary.com defines an entrepreneur as, “a person who organises and manages any enterprise, especially a business, usually with considerable initiative and risk.” You will notice two key words here, which are ‘opportunity’ and ‘initiative’. These are positive-sounding words that indicate a go-getter, a dynamo, carpe diem etc. Could it be that appearing to act quickly taps into these associations with the entrepreneurial mindset?
Short-term tactics over long-term benefit?
In some industries, such as software, electronics, fashion and consumer-packaged goods, the time horizon of LTP may appear counter-productive to imminent demand and trends. Alternatively, you have industries such as utilities, construction, pensions and banking that operate over comparatively long timespans. These industries simply cannot and do not need to respond to short-term trends and innovation. Could the former benefit from some of the discipline of the latter? Sure, a fashion business responds to current trends and styles, but if they want to become Dior, Chanel or Prada, how do they get there? The fast-fashion retailer has challenges that are more acute to them, such as the potential environmental impact, sources of clothing in China or being accused of being sweatshops. The luxury designer brand has different long-term challenges selling high-margin, low-volume pieces.
Long-term planning time investment
The elephant in the room is the time required to conduct a long-term strategic planning exercise. Not all businesses see the benefit. Many like to be seen as dynamic and rapid. Some just don’t want to invest the time required. After all, we recently covered some of the drawbacks of a formal planning process. There are significant benefits to be had – though they won’t be seen today. Remember that the largest success stories of sustained, superior profitability understand the real value and benefits of long-term planning. With the framework set for organisational growth, employee, customer and stakeholder satisfaction, plus a steadfast commitment to excellence comes growth and profit. So, are some leaders and directors unclear of the benefits, are they time-poor or just avoiding the work?
To LTP or not to LTP, that is the question
It is clear that not every business wants to commit the time and resources to long-range planning exercises. However, there are certain circumstances that bring the need for LTP into question. Here are 10 examples of why you need a long-term plan (LTP):
- Are you looking to sell the business?
- Are you looking for external investment?
- Do you need to borrow over the long-term?
- Do you plan large capital expenditure with benefits over many years?
- Is your industry facing future uncertainty?
- Is regulation in your industry currently under review?
- Can your organisation keep growing doing the same thing?
- Can you continue to build the capability you need to grow?
- Are your competitors prone to disruptive innovation?
- Are you bidding for long-term contracts?
Organisations that follow a long-term plan tend to become leaders in their industry. They learn, optimise, grow, follow a vision and provide a roadmap for success. In summary, these leaders have a farsightedness, a discipline and a confidence in execution.
Support for strat plans, LTP, MTP and AOP
Think Beyond is a management consultancy working with the corporate sector. Our clients cover industries from software and technology to manufacturing and energy. We offer a range of consulting services to provide advisory and assurance to leaders. These include solutions to plan for success including strategic planning, long-term planning, assurance and programmes. Additionally, our value-add solutions help businesses to find new opportunities and accelerate business performance.
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Finally, why not check out a few of our other advisory articles for tips and ideas
[i] https://dictionary.cambridge.org/dictionary/english/entrepreneur